Fostering Entrepreneurs’ Capabilities to Outline Sustainable Strategies in ‘Stunted’ SMEs through Modelling and Simulation: a Dynamic Resource Based View

The literature recognises the phenomenon of ‘dwarf’ or ‘stunted’ small and micro firms (in Italian nanismo aziendale) and that they might represent potential lost opportunities for owners and the local economy. Based on a field survey conducted by Bianchi et al. (2003) and the analysis previously developed by the authors of this paper in sketching a simple ‘insight’ model to simulate the behaviour of such firms (Bianchi & Winch, 2005), this work aims to show further research developments in the effort to better understand the business dwarfism phenomenon. A system dynamics model replicating the basic no-growth, cyclical behaviour attributed to “stunted” SMEs is firstly analysed. Alternative policies arising from different entrepreneur’s targets and attitudes towards strategic resources, aimed to change that behaviour to one of stability or steady growth, are then tested and commented. Although the model encompasses a larger range of inter-relationships than in its early version, it is still a simple insight tool that will be used by the authors in a later step of the research, in Euram Conference, Munich (Germany), 4-5 May 2005 2 order to conduct field experiments on the way “stunted” business entrepreneurs can better learn and perceive weak signals of crisis or growth opportunities. In this simple form, the model does link behaviours to system structure and could support individual entrepreneurs in understanding the reasons for dwarfism in their firm and the potential for unleashing growth. It could also further form the basis for a more detailed model to support the identification and evaluation of strategic alternatives in individual firms.