Chapter Listing | Return to 1997 Topical Index

IMPLICATIONS FOR ENTREPRENEURSHIP RESEARCH AND PRACTICE

In sum, this research illuminates the importance of flexibility and knowledge concerns in contingent resource use, especially in entrepreneurial firms.  Cost issues, however, were not salient.  Entrepreneurial firms have the most to gain as well as the most to lose by using technical contingent resources.  Contingent workers have valuable skills that are not represented in the full–time workforce.  Accordingly, mechanisms to graft this knowledge onto the firm are especially important.  This is one avenue for entrepreneurial firms to quickly assimilate knowledge without lengthy recruitment efforts, allowing them to minimize their time time–to–market.  The dangers, though, are two–fold.  First, contingent individuals can hold the entrepreneurial firms as an economic hostage.  If the firm becomes dependent on one of these individuals, they may be vulnerable to demands of drastically increase wage rates.  Second, these individuals may disseminate valuable firm–unique knowledge, reducing the entrepreneurial firm’s ability to sustain a competitive advantage resulting from this unique know–how.  The dangers inherent in contingent resource use underscore the importance of grafting the knowledge held by these individuals onto the firm.  This can reduce the chance of exorbitant wage demands.  And while dissemination risks must be considered, short product life cycles and time–to–market pressures in this industry reduce the risk that such disseminated knowledge could be profitably used by a competitor.

Entrepreneurial firms face two challenges with regard to their stocks of knowledge that are enabling of competitive advantage.  First, they are more likely to experience capability gaps than their large firm competitors because of their small size and less access to resources.  Second, they have neither the time nor the financial resources to build all of the knowledge that they need in–house.  Taping into external stocks of knowledge is important in building core capabilities across many if not all firms (Leonard–Barton, 1995).  But for entrepreneurial firms, it is especially important.  Contingent resource use may represent one expedient mean of doing this.  Other methods of acquiring external knowledge such as joint ventures, alliances, or formalized outsourcing arrangements may require significant time and resource commitments; contingent resource use does not, making it a viable option for start–up firms with limited time and capital.

The research conducted for this study indicates that technical contingent workers in the software industry have individual skill and knowledge levels that are, on average, equal to if not
greater than full–time employees'. Thus, they are valuable sources of knowledge on industry best practices and skills that may contribute to the competitive advantage.  In order to effectively graft the knowledge held in contingent resources onto the firm, entrepreneurial firms should consider developing an environment which fosters the transfer of knowledge.  As discussed above, these firms’ use patterns of  contingent resources are characterized by integration and lack of boundaries.  Formal and informal integration mechanisms are one attribute necessary for the transfer of knowledge (e.g. Hamel, 1991; Nonaka & Takeuchi, 1995;  Pisano, 1994);  therefore, entrepreneurial firm have mechanisms in place to transfer knowledge.  Other
 conditions that facilitate the transfer of knowledge include the motivations to transfer knowledge (by both the source and recipient), perceived reliability of the source of knowledge, absorptive capacity, retentive capacity, and a conducive organizational context (e.g. Szulanski, 1995).  Entrepreneurial firms may want to consider more aggressive strategies to promote higher motivation to transfer knowledge.  Additionally, entrepreneurial firms, by virtue of their size, have lower levels of absorptive capacity;   thus, they may have to more aggressively develop this capacity in order to most effectively assimilate external knowledge.

The implications for managers in entrepreneurial firms revolve around capitalizing on the knowledge held in contingent resources.  These firms should continue to critically scrutinize contingent resource skills immediately, and retain only those that provide strong skill sets.  They should also continue to maintain high levels of integration.  Additionally, though, these firms should buttress this integration with mechanisms to encourage more knowledge transfer.  Also, managers in entrepreneurial firms should be wary of popular business press articles offering prescriptions on contingent work use as entrepreneurial firms’ motives, use patterns, and outcome surrounding contingent work are significantly different than those found in non–entrepreneurial firms.

The implications for future research in entrepreneurship and organizational knowledge revolve around examining contingent resources as an expedient method of grafting external knowledge onto the firm.  Future empirical studies using a larger sample of firms may provide interesting insights into the conditions under which firms are able to effectively harness this pool of knowledge.  Future research into the trade–off between knowledge dissemination and accumulation would also build on the body of work on the knowledge construct.  The picture of contingent resource use painted here may also have wider implications for strategic management scholars.  With the increasing interest in knowledge based theories of the firm, examining the market vs. hierarchy decision at its most simple level, whether to bring in a contingent person or a regular employee, may help us to better understand why firms exist in the forms that they do.
 

Top of page | Chapter Listing | Return to 1997 Topical Index

1997 Babson College All Rights Reserved
Last Updated 03/21/98