Purpose – Small and medium size enterprises (SMEs) located in particular geographical areas are producing and selling regional products to domestic and foreign markets. Most of the local activities are embedded in historical tradition and geographic, cultural and social specificity. This article aims to investigate the effect of local environment on the success of two Portuguese SMEs. Design/methodology/approach – The authors use case study methodology to understand whether local environment influences the nature of the competitive advantage of the small firms and their ability to gain access to resources that enable them to compete with the industrial low price substitutes produced by larger firms. Fingings – The key conclusion of the study is that the two firms analysed rely strongly on the specific characteristics of the local environment and on partnerships with local producers (raw materials or products) in order to achieve the economic scale that allows them to compete in the domestic and foreign markets. Originality/value – Due to the limitations of the present analysis concerning the way buyers affect small suppliers' ability to maintain core artisanal knowledge, future research should also examine how this influence works. For example, how firms learn from their network links and how belonging to a network might drive them to internationalisation, and the choice of countries made. In addition, future research should explore the impact of the region of origin concept on new business formation and internationalisation.
EuroMed Journal of Business – Emerald Publishing
Published: Sep 19, 2008
Keywords: Small to medium‐sized enterprises; Partnership; Regional development; Portugal