Management and Micro Firm Essay Example

smallest type of business organization, employing less than ten people (EU, 2011). In the Irish tourism industry, micro firms are the most common. They make up around 16,500 enterprises, accounting for almost ninety percent of the industry (Kelliher and Reinl, 2010). These micro firms contribute to economic development not only by their G.D.P. contribution but also by supporting families and local communities (Wheelock and Baines, 1998; Phillipson et al.).

According to Liberman-Yaconi et al. (2010), micro firms in 2004 played a crucial role in promoting dynamic competitiveness, business activity, and competition. These firms have distinct characteristics that differentiate them from small, medium-sized, and large firms, as summarized in appendix one. At the structural level, they have limited assets, lack scale economies, and employ only a small number of people (Liberman-Yaconi et al. 2010). Additionally, these firms operate in a highly competitive environment where they have limited influence (Kelliher and Reinl, 2009). However, micro firms have certain structural advantages that can enhance their business performance, such as low levels of bureaucracy (Devins et al.).

2005) and an environmental closeness (Greenbank, 2000). At management level, there is a lack of the agency problem, with the owner/ manager sometimes taking on the roles of resource owner, resource allocator, and operational employee. Managers face challenges in time management (Samujh, 2011) as they juggle long hours and are torn between operational and strategic tasks (Greenbank, 2000). However, managers have opportunities to enhance the performance of the micro firm through the development of unique leadership (Kelliher and Reinl, 2009) to guide employees towards organizational objectives.

Micro firm relationships with their environment are distinct: They are integrated within local communities (Phillipson et al. 2004) and

families (Oughton et al. 2003) and heavily rely on local sources of information (Devins et al. 2005).

4.0 Tourism Micro Firm Innovation

Innovation in large firms involves the utilization of formal management methods within extensive, frequently intricate, organizational structures (Smith et al.

In order for communication to improve and new thinking to be surfaced, it is important to consider the year 2008 (Salaman and Storey, 2009). On the other hand, the micro firm environment has a different impact on innovation (Simpson, 2001). The process of innovation in micro firms is often informal and emerges as a response to environmental contingencies. Owners/managers rely on intuition (Greenbank, 2000) and stakeholder information (Devins et al. 2005) in order to innovate. Unlike larger firms, micro firm innovation tends to be incremental rather than radical (Simpson, 2001).

The innovation process of micro firms is responsive to environmental pressures, particularly those of key suppliers and customers (Corrocher et al. 2009). The owner/manager plays a crucial role in micro firm innovation because of the absence of employees (Matlay, 1999), their control over resources (Devins et al. 2005), and the dynamic interaction between the market environment and the owner/manager. The owner/manager actively participates in this environment through daily interactions with stakeholders (O'Dwyer and Ryan, 2000).

Micro firm innovation refers to the creative use of resources and the development of firm-level capabilities that result in new commercial outcomes through the creation of new products, services, and market access methods. This type of innovation relies heavily on the owner/manager's role and their continuous development of managerial capability for innovation, which becomes a sustainable competitive advantage for the micro firm. However, micro firms face unique barriers to innovation. These

barriers can be classified as external to the firm, internal to the firm, or associated with the owner/manager. Two external barriers include the embedded nature of the firm (Atterton, 2007) and environmental turbulence (Kelliher and Reinl, 2009).

Atterton (2007) argues that the firm's embedded nature fosters a sense of solidarity within the local business community. This community actively resists ideas from outside and develops social norms and practices to support this resistance. The micro firm faces environmental turbulence, with limited ability to influence this environment (Greenbank,2000) and limited resources (Phillipson et al. 2004). These factors make innovation risky and potentially damaging to the firm's long-term survival. There are two internal barriers. In larger organizations, human resources are seen as an enabler of innovation (Salaman and Storey,2009; Barnett and Storey, 2000).

In contrast, in micro firms, the utilization of assets is often low and leads to conflict (Matlay, 1999), which can hinder the achievement of managerial goals. Similarly, micro firm assets act as a hindrance to innovation because of their limited and often family-owned nature (Oughton et al., 2003), which discourages change. Finally, there are five barriers to innovation associated with the owner/manager. Lifestyle motivation (Greenbank, 2000) creates a barrier as owners/managers avoid adopting a business philosophy (Beaver, 2007) and prioritize fulfilling lifestyle objectives. This inhibits the development of mutually understandable relationships with suppliers, customers, and investors. The dominance of the owner/manager (Devins et al.) also plays a role in these barriers.

The inability of the owner/manager to act on advice and maintain personal power can be a barrier in 2005 (Chell, 1985). Risk intolerance (Tregear, 2005; Wheelock and Baines, 1998) prevents the owner/manager from engaging with risk

and implementing risk-based strategies that promote innovation. The owner/manager's role (O'Dwyer and Ryan, 2000) excessively involves operational work, which hinders strategic thinking related to innovation (Beaver, 2007). Time management problems (Samujh, 2011) also limit the owner/manager's ability to engage with new ideas. The theoretical framework for this research includes the resource-based view (Barney, 1991; Wernerfelt, 1984) and the dynamic capabilities approach (Eisenhardt and Martin, 2000; Teece et al., 1997).

Micro firm owner managers possess their own distinctive management skills (Greenbank, 2000), which allow them to create and develop resources. Similarly, these owner/managers have a unique environmental awareness (Phillipson et al. 2004) that enables them to shape dynamic capabilities within micro firms. These dynamic capabilities facilitate the development of more sustainable forms of competitive advantage. Additionally, these capabilities empower the firm to learn and actively adapt to environmental changes (Winter, 2003). When well perfected, managerial capability has the potential to become a dynamic capability that is deeply embedded in the firm (Groysberg, 2006). This capability not only guides the firm's competitive trajectory but is also influenced by the firm's interaction with this path.

6.0 Managerial Capability For Innovation: Research Gap

There is a growing interest in the management of innovation in the academic literature (Smith et al. 2008). Specifically, there is focus on the managerial capability that drives innovation. Moss Kanter (2006) emphasizes the significance of restructuring organizations to unlock latent innovation. Mol and Birkinshaw (2008) highlight the role of formal management tools like TQM in this restructuring process. Salaman and Storey (2009), from a human resource perspective, underscore the importance of top management leadership in reshaping managerial mindsets and organizational culture. However, applying these models of

managerial innovation from research to larger firms in the context of tourism micro firms poses challenges.

Tourism micro firms, which have limited resources and lack human capital (Thomas et al. 2011), require the owner/manager's active involvement and informal communication due to their simple organizational structure (Devins et al. 2005). It is important to exercise caution when applying concepts such as leadership from larger organizations to micro firms, as the context-based leadership is more suitable for developing management competence in the micro firm setting (Kelliher and Reinl, 2009). In contrast, the larger firm's leadership requires a more public engagement (Salaman and Storey, 2009).

Therefore, there is a research gap in understanding the specific managerial capabilities needed for innovation in micro tourism firms and how these capabilities are evident within organizations.

7.0 Micro Firm Managerial Capability For Innovation

Managerial capability is the human capability that establishes a long-term competitive advantage for an organization (Barney et al. 2001). In micro firms, the owner/manager plays a significant role in managerial work (Greenbank, 2000).

The micro firm environment offers owner/managers three main sources of resources. The first source is endowments that come from family or local community embeddedness. These endowments can be leveraged by the owner/manager to develop the firm's competitive advantage. The second source comes from the stakeholder environment, which consists of strong and weak ties. These ties provide the owner/manager with resources in the form of business advice and innovation opportunities.

In 2005, it was discovered that managerial capability can be enhanced by the first two sources of resources mentioned above, namely information resources and social resources. The third source of resources is based on the owner/ manager's proximity

to the market environment, allowing observation and interaction with potential innovations. This direct contact and market proximity provides an opportunity for the owner/ manager to observe and engage with market developments. One way to evaluate the managerial capability of micro firms is by examining the traits exhibited by owner/ managers in their behavior. A thorough review of existing literature has led to the identification of specific traits, which are compiled in Table 3. Analyzing this table has led to the identification of four capability criteria that make up micro firm managerial capability. The leadership criterion plays a crucial role in how owner/ managers influence members of their micro firm towards achieving organizational goals, by creating shared meaning. This insight is based on Kruse's concept, as cited in Devins et al. (2005).

According to Beaver (2007), using business philosophy as a criterion allows the owner/manager to utilize tools like formal planning, accounting methods, and marketing techniques in their organizational work. Greenbank (2000) suggests that problem solving enables the owner/manager to actively engage in operational work and convert it into commercial knowledge. Additionally, by developing a criterion of people relationships, the owner/manager can cultivate relationships with stakeholders and employees. Figure 1 presents a taxonomy of micro firm managerial capability for innovation, which is based on the interaction between the owner/manager's capabilities and micro firm resources. The taxonomy is driven by the owner/manager's input and results in managerial capability for innovation as the output. It is proposed that these three criteria of managerial capability enable the owner/manager to effectively interact with available resources.

The text argues that the resources of micro firms, such as endowments, stakeholder ties, and the

close market, provide opportunities for owner/managers to develop their managerial capability for innovation. This capability is based on specific criteria. Figure 2 presents a model of managerial capability for innovation, with the micro firm market environment as the outer circle. This environment interacts with stakeholder environments, influencing and being influenced by them. Inside the micro firm market environment is the near environment, which includes resources like the family. Within this lies the internal environment of the firm and, ultimately, the owner/manager. The owner/manager's capability for innovation is shaped by these environments. Although the owner/manager is closest to the internal environment of the firm, it doesn't mean that this environment has the most influence on innovation capability.

Innovation capability relies on communication mechanisms in people's relationships, which are established in various environments. The business philosophy is internal to the owner/manager but can be shaped through interaction with an appropriate environment. This philosophy helps the owner/manager interact with external environments in order to build managerial capability for innovation.

8.0 Research Questions And Methodology

The research aims to create a model of managerial capability in Irish tourism micro firms. Within this aim, there are four research questions. The first question seeks to understand the nature of innovation in Irish tourism micro firms, as relatively little is known about this topic. Previous research on micro firms has mostly focused on those with ample human capital and technological assets.

The text suggests that micro firm innovation is unique compared to innovation in larger firms. It also discusses the differences in the environment experienced by managers in micro firms compared to larger firms. The role of the manager as owner

and manager of resources is highlighted as unique in micro firms. In addition, the text mentions the potential link between owner/managers of micro firms and innovation.

The inclusion of the final question, "How does managerial capability for innovation impact on innovation in Irish tourism micro firms," serves to connect questions three and one and fulfill the study's purpose of developing a comprehensive model. A qualitative research approach is proposed for this study. Understanding managerial work within micro firms requires considering the specific social context rather than solely focusing on economic rationality (Phillipson et al., 2004).

According to Hakim (2000), qualitative methodology allows for the collection of data related to complex, interwoven, and difficult-to-measure variables. Additionally, Greenbank (2000) suggests that micro firm owner/managers are often driven by lifestyle rather than business goals, and qualitative methodology provides insights into their lives. This research aims to explore a new area, as highlighted by Silverman (2005), and in-depth interviews are proposed as the research method.

This allows for the collection of comprehensive data from the owner/manager, who has the most significant impact on the micro firm's operations (Devins et al. 2005). This influence is responsible for shaping the unique culture of each micro firm (Kelliher and Reinl, 2009), as well as capturing the experiential nature of the owner/manager's work (Deakins et al. 2002).

9.0 Conclusion

The study aims to provide a three-fold contribution. It offers practitioners and industry thought leaders a model for improving managerial capability in innovation, which they can use to enhance their own capabilities.

For the first time, this model will be tailored specifically to the industry context and firm type, making it

unique. Additionally, policy makers will be able to benefit from interacting with the model, as it will assist them in allocating scarce resources such as grants and training in a more efficient and effective manner. Finally, this work will address a significant gap in academic literature and provide opportunities for publication.