Manufacturing Strategies of Network-Based Small Firms: Observations on the Textile Industry in Taiwan (1999)

It is well recognized that small entrepreneurial firms play an important role in a nation's economic development. They are often sources of new ideas, materials, processes, and services that larger firms may be unable or reluctant to provide (Robbins 1994). Megginson et al. (1994) noted that people have a much higher opinion of small firms than of large firms, in part because a small firm is characterized by individual freedom, risk-taking, initiative, thrift, frugality, and hard work. However, many small business ventures have failed because of inadequate financing and inadequate management. The latter inadequacy is characterized by a lack of business knowledge, inadequate planning, and inexperience (Megginson et al. 1994). Because of lack of resources associated with their size, small firms may develop business networks. A business network can be defined as linkages among It provides external sources for various types of input that complement or substitute for a given firm's inadequacies (Malecki and Tootle 1996). Nohria and Eccles (1992, p.2) pointed out that the model of organization that is considered characteristic of New Competition is a network of lateral and horizontal interlinkages within and among firms. In order to enhance competitiveness, both large and small firms have deployed various approaches to re-position their competitive priorities regarding cost, quality, and flexibility, so as to satisfy customer needs. Paying more attention to strategic decisions that serve to improve manufacturing functions represents one of these approaches and reflects a recognition of crucial role of manufacturing strategy in defining competitive advantage (see Montagno et al. 1995, for example). Various studies on manufacturing strategies have tried to provide guidelines for effective development of manufacturing strengths as a means to achieve competitive goals. However, much of insight derived from this research is oriented toward management within an individual firm rather than toward constituents of entire network. A review of literature also reveals that empirical studies on manufacturing strategies tends to focus on large This is partly due to fact that management procedures in small firms are unlikely to be institutionalized or documented. As strategic management places an ever-increasing emphasis on synthesis of efforts within supply chain, it is useful to investigate manufacturing strategies from viewpoint of both an individual establishment and an entire network. The objective of this research is to explore manufacturing strategies and competitive priorities of networked small firms in Taiwan. In particular, this research examines manufacturing operations of networked small firms in contrast to those of large integrated companies in textile industry. A study of this kind may provide information useful to understanding how small firms can thrive in a competitive environment. Insights into operations of small firms may also help government formulate policies which facilitate development of nation's economy. Furthermore, this investigation of manufacturing strategies in Taiwan may provide a range of insights into Chinese approach to management. Through an in-depth field survey, we examine manufacturing strategies of network, discuss its competitive priorities, and suggest several propositions concerning management of network-based production systems. Research Background and Framework Background Small firms have flourished over past four decades in Taiwan and have played a major role in manufacturing industry (Liu, Liu, and Wu 1995). Several studies have found that a great deal of success of small firms can be linked to effective networking of their production systems. For example, Wu (1994) noted that a cooperative network links various specialized and mutually supplemented processes, thereby creating a production system of high flexibility and capability. …