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published as:
Mason, Cecily, Castleman, Tanya and Parker, Craig 2008, Communities
of enterprise : developing regional SMEs in the knowledge economy,
Journal of enterprise information management, vol. 21, no. 6, pp. 571-
584.
.
Copyright : 2008, Emerald Group Publishing Limited
Mason, C., Castleman, T. and Parker, C.M. (2008) 'Communities of enterprise: developing regional SMEs in the
knowledge economy', Journal of Enterprise Information Management, vol. 21, no. 6. pp. 571-584.
Page 1
Communities of enterprise: developing regional SMEs in
the knowledge economy
Cecily Mason
School of Management & Marketing, Deakin University
Pigdons Road, Waurn Ponds, Geelong, Victoria, Australia, 3217
Email: cecily.mason@deakin.edu.au
Phone: +61 3 5227 2577, Fax: + 61 3 5227 2151
Tanya Castleman
Deakin Business School, Deakin University
70 Elgar Road, Burwood, Victoria, Australia, 3144
Email: tanya.castleman@deakin.edu.au
Phone: +61 3 9244 5527, Fax: + 61 3 9244 5533
Craig M. Parker
School of Information Systems, Deakin University
70 Elgar Road, Burwood, Victoria, Australia, 3144
Email: craig.parker@deakin.edu.au
Phone: +61 3 9244 6924, Fax: +61 3 9244 6928
Abstract
Purpose – This paper proposes the concepts of Communities of Enterprise (CoEs) and
Virtual Communities of Enterprise (VCoEs) to describe business networking patterns in
regional areas where there is no central organisational or industry focus and small and
medium enterprises dominate the economy.
Design/methodology/approach – Based on analysis of the literature this paper builds on
theoretical understandings of knowledge management, clustering and regional development.
Findings – The concept of CoEs is most appropriate for regional areas characterised by many
small enterprises in diverse industries. CoEs enhance development of regional clusters by
contributing to their intellectual capital, innovation culture, value networks and social capital.
The incorporation of ICT creates VCoEs which provide added potential by enabling regions
to expand their learning potential through innovation.
Research limitations/implications – This paper provides a conceptual foundation for
empirical research into regional network or cluster development using ICT.
Practical implications – Virtual Communities of Enterprise value creation potential is
substantial but only when the socioeconomic elements of regional clusters are understood.
The VCoE approach addresses the fact that without an industry focus it can be difficult to
engage and link SMEs from different industries, although this is where the greatest potential
for value creation in regional clusters is to be found.
Originality/value – The Virtual Communities of Enterprise (VCoEs) concept specifically
addresses the unique requirements of SMEs in regions. It has the potential to provide value
for regions in a way few ICT based regional development initiatives have been able to
achieve.
Keywords – virtual communities of practice (CoPs), virtual communities of enterprise
(VCoEs), small and medium enterprises (SMEs), cross-industry regional clusters, knowledge
economy, knowledge management (KM), knowledge sharing, social capital.
Mason, C., Castleman, T. and Parker, C.M. (2008) 'Communities of enterprise: developing regional SMEs in the
knowledge economy', Journal of Enterprise Information Management, vol. 21, no. 6. pp. 571-584.
Page 2
Paper type Literature Review
Introduction
There have been many efforts by governments and other bodies to stimulate regional
development through the formation of clusters (DTI, 2004). The attractiveness of clusters
derives from their ability to concentrate economic activity in a particular location. The critical
mass helps drive further development and outstrips the abilities of individual enterprises to
develop competitiveness. Examples of successful cluster development have been widely
reported (Longhi 1999; Hospers and Beugelsdijk, 2002; DTI 2004; Feldman et al. 2005; St
John and Pouder 2006) and there is considerable interest in emulating their success (Porter,
2003). Many have identified the potential contribution of information and communication
technologies (ICT) to cluster development through online networking and knowledge
sharing.
A major value of clusters is their contribution to the creation of knowledge (MacKinnon et
al., 2002). The enterprises that participate in a cluster share what they know, enhancing the
capability of the region as well as the capabilities of the individual enterprises (Saxenian,
1994). Although the participating enterprises may compete against each other on the level of
the firm, at another level they gain competitive advantage from their contribution to their
common interests (Prahalad and Ramaswamy, 2004). This seeming paradox is explained by
the fact that knowledge contributes to value by stimulating innovation which is a key source
of value creation (Spence, 2004).
While it is accepted that networks facilitate knowledge creation which is the basis of
innovation (Kodama 2004), how this is accomplished remains problematic because the
strategy for cluster development is heavily dependent on the character of the local context
(Gertler and Wolfe, 2002). Local circumstances (including history, culture, industry makeup,
and leadership resources) vary and, consequently, each regional development project is
unique. A region can learn from other clusters, but must develop its own strategy suited to its
own unique context (Boschma and Lambooy, 2002).
Information and communication technologies offer a powerful tool for communication and
knowledge exchange and provide new forms of value formation (Benbya et al., 2004).
Recognising their potential, many regional initiatives have looked to ICTs to stimulate
knowledge sharing and the development of networks (de Berranger et al., 2004). However, it
has not been easy to realise the benefits of online initiatives and it appears that often there has
been a preoccupation with technology infrastructure at the expense of attention to the
underlying social and economic characteristics of regions (Hearn et al. 2004; Fisher and
Craig 2005; Gengatharen et al. 2005). Further exploration suggests that the nature of regional
economies and society does not align well with the cluster development model presented in
the literature (Asheim et al. 2006; Henry et al. 2006; Simmie 2006).
This paper presents a new concept to describe how small and medium enterprises (SMEs)
from diverse industries network and share knowledge to develop regional clusters. It also
considers the role of ICT in facilitating business networking and knowledge sharing in this
context. The contributions of the field of knowledge management, in particular the concepts
of ‘community of practice’ (CoP) and ‘virtual community of practice’ (VCoP) are extended
to a new concept, ‘(Virtual) Community of Enterprise’ (VCoE) which more accurately
describes the regional milieu, with its diversity of industries and reliance on SMEs. We
anticipate that the concept of ‘Virtual Community of Enterprise’ will contribute to ICT
initiatives that create value by guiding practitioners in their efforts to facilitate knowledge
sharing networks and, ultimately, regional clusters.
Mason, C., Castleman, T. and Parker, C.M. (2008) 'Communities of enterprise: developing regional SMEs in the
knowledge economy', Journal of Enterprise Information Management, vol. 21, no. 6. pp. 571-584.
Page 3
First, we summarise the literature on clusters and their contribution to the development of
regions. We identify key elements that lead to successful clusters. We then consider the
potential contribution of ICT, noting that the regional industry structure is important as is the
role of SMEs. We discuss the dynamics of networks and their ability to promote innovation
and thus stimulate cluster formation before setting out the concept, (Virtual) Community of
Enterprise and explaining its alignment with the economic and social reality of many regional
areas and the ways it can promote regional development. Finally, we outline some research
directions in which the VCoE concept can be applied.
Clusters, Small Business and Regional Development
Clusters are not a new approach to regional development. At the end of the 19th Century
Marshall (1947) first identified the clustering effect of agglomeration as a regional
development strategy. He described how geographically proximate firms enjoyed many
advantages when they were involved in cooperative economies of buying and selling labour,
goods and services. He named these industrial districts. Recent examples include the much
celebrated Emilia-Romagna region of Third Italy where decentralised networks of specialised
SMEs provide the momentum for the economy (Amin, 1999).
The term clusters was brought into the regional development lexicon by Porter (1990). He
emphasised their economic potential by arguing that sustaining competitive advantage in a
globalised world relied on cooperation at the local level among manufacturing firms which
otherwise competed with each other. When such cooperation is achieved, stronger clusters
emerge with increased regional productivity. New innovations are created and new
businesses are established.
With the rise of the global information economy, the focus of competition shifted from
physical resources to the ability to create, process, and efficiently apply knowledge (Castells,
1997). European economists have analysed local and regional development processes
(MacKinnon et al., 2002) and differentiated the innovative milieux required for this new
knowledge-driven economy from traditional industrial districts. The innovative milieu is
characterised by collective learning, cooperation and the transfer of knowledge. This results
in innovative synergy rather than simply in interaction (Capello, 1999). The ability to
transform the collective learning of the innovative milieu into profit relies on both the firm’s
internal ability to exploit it and the strategies the firm uses to obtain competitive advantage
from it. When this is successful, a learning region (Morgan 1997) emerges with sustained
competitive advantage. This has been achieved in high technology clusters of which Silicon
Valley is a pre-eminent example (Lawson and Lorenz, 1999).
In these contexts, SMEs are a critical component. Their small size enables them to be flexible
and adaptive, to be innovative, diversify and reduce production costs (Raymond and Blili,
2001). Many governments are recognising the critical role SMEs play in their regions and are
implementing strategies to facilitate SME development. Frequently, however, the anticipated
results are not readily achieved (Cooke et al. 2003; Cuadrado-Roura and Garcia-Tabuenca
2004). This indicates the need for a long term view such as Singapore’s SME21, which is an
over-arching ten-year plan to ensure the ongoing viability of SMEs in that region (Sum et al.,
2004).
Regional economic activity often has no single industry focus (Baum et al. 2007). This is
because SMEs, which operate in a broad range of industries, form such a major component of
those economies. Such regions are based on a combination of business networks and
horizontal, trust-based, socio-economic networks, used to create, diffuse and use knowledge
and information. These are defined by their location rather than a dominant industry and this
Mason, C., Castleman, T. and Parker, C.M. (2008) 'Communities of enterprise: developing regional SMEs in the
knowledge economy', Journal of Enterprise Information Management, vol. 21, no. 6. pp. 571-584.
Page 4
type of cluster is more characteristic of the industrial districts of Third Italy (Boschma and
Lambooy; 2002).
Two resources within regions are the networking that occurs between organisations and the
collective learning they engage in. The capacity for regional development through sustained
innovation and new product generation depends on this regional collective learning. The
preconditions for collective learning are trust and social norms that support inter-firm
networking and enable the diffusion of embodied expertise to develop and change over time
(Keeble et al., 1999, Boschma and Lambooy, 2002). This networking environment, where
local SMEs are involved in cooperative competition, has been dramatically changed by
globalisation. There is pressure for global innovation and learning to meet global competition
which has resulted in less local interaction and has increased the influence of powerful large
firms.
Regions that include many SMEs where no single industry dominates require a mechanism
for integrating the knowledge sharing and innovation of their diverse firms. With the
intensification of competitive pressures, regions must work at developing business activity
through more intensive networking and innovation activity. Responding to this pressure, ICT
has been frequently seen as a powerful tool to link such a multitude of small businesses and
to stimulate the kind of knowledge sharing and innovation that will lead to regional
development. In the following section we explore the potential that ICT offers in such
contexts.
ICT and regional clusters
Rapid advances in ICT have made it possible to link the activities of many enterprises into
large networks, enabling widely dispersed organisations to cooperate via computer networks
including the Internet. These eClusters or ‘digital enterprise communities’ (Brown and
Lockett, 2001, p. 52) not only change the way that firms interact; the basis on which business
is conducted is also dramatically changed. In eClusters, communities of SMEs interact in a
similar way to Virtual Organisations. Trust is critical for inter-firm alliances and forms the
basis on which business is conducted. Three types of intermediaries are pivotal for eClusters:
the community on which the eCluster is based which is essential for generating initial trust;
the technology or the ICT platform by which networking is conducted; and the enterprise or
the applications service provider (Boschma and Lambooy 2002).
The potential of ICT to facilitate clustering is evident (Sum et al. 2004; Tan 2006). The
outstanding success of Silicon Valley and other high tech clusters has emboldened many
government ICT initiatives that seek to facilitate regional clustering (Brown and Lockett,
2001; Hospers and Beugelsdijk, 2002; Kolko, 2002; Gertler and Wolfe, 2002; Diez, 2003).
The results of these programs have been inconsistent in achieving regional development
(Cuadrado-Roura and Garcia-Tabuenca, 2004; Hearn et al., 2004; Gengatharen et al, 2005).
We have identified at least two drawbacks associated with the reliance on ICT for regional
development (Mason et al., 2005). First, research has shown that ICT can have a dispersive
effect (Bellini et al., 2003) which may even lead to the erosion of existing clusters (Wever
and Stam, 1999). A region may gain great advantage from the connection among its denizens
and their links to the world beyond, but it may also dissipate the local focus and encourage
competition from stronger entities outside the region. Secondly, an emphasis on technologies
themselves rather than what they are designed to facilitate may obscure the key issue in the
knowledge economy – knowledge and its contribution to innovation and competitiveness.
The potential of ICT for regional networking and the mixed results in its deployment suggest
that there are other factors that need attention. It appears that the great enthusiasm for online
Mason, C., Castleman, T. and Parker, C.M. (2008) 'Communities of enterprise: developing regional SMEs in the
knowledge economy', Journal of Enterprise Information Management, vol. 21, no. 6. pp. 571-584.
Page 5
technologies that support networking and knowledge sharing has tended to distract attention
from social and socio-technical solutions. This indicates that rather than seeing online
technologies as a generator of regional development, we need research to identify how these
technologies can stimulate knowledge exchange and knowledge generation through active
knowledge management (KM) strategies (Kaufmann et al., 2003). It is important that these
techniques and models are appropriate to the context in which they will be used so that they
can support the particular social relationships and dynamics to generate innovation and
regional success.
Innovation, learning and cluster success
Innovative capacity is identified as one of the most important competitive factors for regional
clusters. This capacity is linked to the continuous learning processes of individual firms and
their inter-firm networks. MacKinnon et al.’s (2002) analysis of the learning region literature
identified a number of key themes including:
Non-material advantages sourced locally rather than globally can be a major basis of
learning.
The creation and transfer of region-specific knowledge facilitates agglomeration of
specialist industries.
Trust is a factor binding networks together and sustains firms’ involvement in
processes of collective learning’
This indicates that socio-economic factors are critical to the development of regional
networking. Taylor and Plummer (2003) argue that creating an environment where enterprise
culture is engendered ‘is the complete antithesis of current cluster policies’ which focus on
policy initiatives for facilitating new firm formation and new jobs (Taylor and Plummer,
2003, p. 560). This is an important observation because the latter approach has not proved
sustainable (Taylor and Plummer, 2003). Instead of focussing on individual firms, a far more
sustainable approach is the facilitation of an enterprise culture by establishing forums where
coalitions can form and re-form on a needs basis. Here larger firms in regions involved in
such coalitions provide the infrastructure and finance for their smaller counterparts. Firms
can participate in more than one coalition at a time and, consequently, these entrepreneurial
SMEs flourish. Enterprise culture is not about establishing new enterprises; rather, it involves
providing a knowledge sharing environment that facilitates the formation of coalitions of
SMEs so that they can exploit emerging business opportunities for their value creating
potential.
To develop a robust knowledge-sharing network, a region needs to employ techniques that
bring together human resources and an enterprise culture. A well-researched form of
developmental network is the community of practice (CoP), which is a voluntary group of
people (community) who share knowledge, skills, expertise and know-how (practice)
(Wenger et al., 2002). Large organisations have found that cross-departmental CoPs provide
the most significant value creating opportunities because they traverse organisational
boundaries. Heavy investment in CoPs and their online counterparts, Virtual Communities of
practice (VCoPs), have resulted in significant value creation (Lemons, 2005).
Many large organizations regard CoPs as the essential business practice of the 21st-century
(Lemons, 2005). These organisations are achieving both intangible and tangible value from
their CoPs including positive impacts on time-to-market, reuse of knowledge, improved
response time, increased employee development, development of knowledge sharing
relationships, improved organizational learning, and successful change implementation
Mason, C., Castleman, T. and Parker, C.M. (2008) 'Communities of enterprise: developing regional SMEs in the
knowledge economy', Journal of Enterprise Information Management, vol. 21, no. 6. pp. 571-584.
Page 6
(Lemons 2005). Lave and Wenger (1991) articulated the Community of Practice (CoP) model
for the learning organisation (Senge, 1990) that innovates continuously.
This model of knowledge management has been applied to SME knowledge sharing in
regional clusters (Vestal and Lopez, 2004). Research to date has focussed on industry-based
clusters (Dewhurst and Cegarra Navarro, 2004; Forsman and Solitander 2004) which works
well for contexts where there is a dominant industry or a large organisation that is the focus
of economic activity in the region. However, this orientation neglects networks with
membership drawn from a variety of industries, such as SMEs in many regional areas, which
can play a significant role in creating value.
From Communities of Practice to Communities of Enterprise
We propose a new version of the Community of Practice concept which relates to the
knowledge sharing, network learning and innovation existing in many regional clusters. We
have named these networks Communities of Enterprise (CoE) to highlight the importance of
participating SMEs and their relationships across industry boundaries. The basis of
interaction and cooperation is their common interest in their respective enterprises. The
economic geographers Taylor and Plummer (2003) identified two sets of interrelated factors
which drive economic development in regions: the level of human resources and an
enterprise culture. Human resources are the latent local know-how and skills of the region
which represent its inherent intellectual capital. Enterprise culture is found among those
exhibiting technological leadership and a willingness to take risks. Enterprise culture involves
a knowledge sharing environment that facilitates the formation of coalitions of SMEs that
exploit emerging business opportunities for their value potential, thus encouraging them to be
enterprising (Taylor and Plummer 2003).
The CoP concept addresses the first driver Taylor and Plumber (2003) identified, viz, access
to the latent know-how and skills in ‘human resources’. However, the focus of a CoP is on
‘practice’ and this does not address the other driver of regional economic development that
they identified, an ‘enterprise culture’. Taylor and Plummer (2003) maintain that the key to
establishing such an enterprise culture is facilitating SMEs’ interaction with each other so
that they are able to exploit opportunities as they arise within the region. This requires forums
where SMEs meet and interact so that new ideas are generated and business opportunities are
identified.
CoPs are appropriate for industry clusters. In CoPs it is the interest in the domain of
knowledge and expertise about a specific practice that drives members’ involvement. CoPs
are based on a shared interest in a particular form of practice. Members share knowledge,
gained from working in the field, simply to improve the skills and expertise of the practice.
The focus on practice puts the emphasis on what people do and thus is suitable for
operations-level activities and for the development of artefacts (Wenger et al. 2002).
In regions where SMEs are involved in diverse industries, however, there is no such common
practice. Consequently, CoPs are not as relevant. What is needed is a coordinating
mechanism around which SMEs can coalesce. A CoE reflects an ‘enterprise culture’. SMEs
focus on the enterprise as a whole, and are engaged in innovation at the strategic level, not on
practice per se. An enterprise culture may be achieved through coalitions between
organisations, or they may simply involve obtaining information about another enterprise
across a number of areas of practice such as marketing, finance and so on. Knowledge
sharing centres on improving the economic viability of the enterprise through innovation at
the strategic level.
Mason, C., Castleman, T. and Parker, C.M. (2008) 'Communities of enterprise: developing regional SMEs in the
knowledge economy', Journal of Enterprise Information Management, vol. 21, no. 6. pp. 571-584.
Page 7
CoEs have the potential, like CoPs, to go online and extend their value creating potential.
SMEs’ lack of internal resources means that they do not have ready access to all the
knowledge they require. Extending a CoE into the online environment (as a Virtual CoE or
VCoE) can provide SMEs with ready access to such knowledge through trusted contacts. The
benefits that this could provide include access to external expertise and information.
Significant time and cost savings can be achieved by avoiding replication of others’ mistakes,
generating new ideas, and by solving problems at the enterprise or strategic level. The
improved communication with other SMEs could lead to better understanding and increased
reputation. This extended access to knowledge could stimulate the generation of innovative
ideas and formation of new alliances (Taylor and Plummer 2003; Molina-Morales 2005).
What this illustrates is that by incorporating ICT and forming VCoEs there is significant
potential not only for improving the knowledge resources of individual SMEs, but for
extending the value and innovative capability of regions.
The concept ‘Communities of Enterprise’ specifically relates to networks of non industry
aligned SMEs, linked by various means, including ICT. In the discussion below, we address
the following questions:
How can Communities of Enterprise contribute to the development of regional
clusters?
How can their contribution be extended by ICT to create successful Virtual
Communities of Enterprise?
Factors in the development of regional clusters
From the literature on regional development we identified four commonly cited aspects of
clusters which indicate areas in which (V)CoEs can contribute to their development:
intellectual capital, a culture of innovation, value networks and social capital. The sections
below show how CoEs and VCoEs can contribute in these areas.
Intellectual Capital Generation
Intellectual capital (IC) can be defined as the value to the community (firm or profession) of
its knowledge and knowing capability (Nahapiet and Ghoshal 2002). It is the key resource in
the knowledge economy (Pulic, 2005). A successful region has the capacity to use its IC to
create, transfer and implement knowledge to facilitate innovation (Smedlund and Poyhonen,
2005). This application of IC creates learning regions where value involves human factors as
well as economic factors; for example, relationships with customers create brand loyalty and
this in turn can convert into tangible value for the SME.
The success of a CoE or VCoE can be assessed by its ability to generate IC through
interaction between human capital (people), structural capital (infrastructure), and external
capital (customers/suppliers/collaborators). For example the members (people) of the CoE
use the ICT (infrastructure) to share knowledge with those external to the region (customers,
etc.) via the VCoE. Examples of the types of intangible value that SMEs and their region are
able to achieve from their IC include: more rapid learning, generation of new ideas for
products and services, re-use of existing knowledge assets, and faster response times (Lesser
and Everest 2001). The generation of this innovative knowledge becomes a source of
sustainable competitive advantage (Dewhurst and Cegarra Navarro 2004). The
entrepreneurial orientation of VCoEs provides access to IC and thus they become a valuable
asset for SMEs and the region. The VCoE can also provide an online repository of
knowledge (IC) that extends the value of the CoE.
Mason, C., Castleman, T. and Parker, C.M. (2008) 'Communities of enterprise: developing regional SMEs in the
knowledge economy', Journal of Enterprise Information Management, vol. 21, no. 6. pp. 571-584.
Page 8
A VCoE can develop IC through well-recognised knowledge-sharing practices, capturing
knowledge and making it available to a wide audience on demand. Online exchange can spur
the interaction process and thus stimulate thought and innovation.
Culture of Innovation
One of the characteristics of successful clusters is having a culture of innovation or an
innovative milieu. It is most visible in high-tech clusters where value is obtained not merely
from developing high-tech products but also through managing the multitude of relations
among people in innovation networks (Capello, 1999, Spence, 2004). This innovative culture
is not limited to high-tech industries but is more general. Innovativeness is associated with
the firm’s capacity to combine and exchange knowledge resources by becoming involved in
inter-organisational relationships that create opportunities for knowledge acquisition and
exploitation (Molina-Morales 2005). This is an evolutionary process of entrepreneurial
behaviour where ICT is incorporated to achieve value through innovative developments in
their businesses, or by extending their reach to incorporate external, even global, coalitions.
CoEs and VCoEs can substantially support an innovative culture in regional clusters. They
establish an enterprise culture where collaborations among SMEs form to exploit emerging
business opportunities for potential value. Through them intellectual capital can be accessed
and developed by these collaborative processes. This maximises innovation and value within
the region. Online interactions through VCoEs extend innovative potential to include
coalitions with external sources so that the inherent knowledge of these external, particularly
global, sources provides value to regions. Access to value inherent in a regional area revolves
around network ties (or the strength of relations) between members (Nahapiet and Ghoshal
1998).
Value Networks
Value networks refer to the tangible and intangible value flowing between groups of people
(Allee, 2003). They are important to regional development because they increase the region’s
potential for innovation, improve the efficiency of systems within the region, and provide
access to the region’s accumulated entrepreneurial experience and region specific knowledge.
CoEs are based on relationships where bi-directional, horizontal flows of knowledge occur
between equal partners. Smedlund and Poyhonen (2005) identified this as a pre-requisite for
innovation in SME networks. Because CoEs are based on trusting relationships, they are
well-suited to facilitating value creation through intellectual capital generation, and are an
effective model for facilitating regional development.
The incorporation of ICT into value networks extends their reach so that people who do not
know each other can share knowledge even though relationships are less intimate. ICT can
also draw different networks together to achieve common goals and combine their knowledge
in new ways. Importantly, ICT can provide access points which enable individuals to
establish identity within a far wider network (Vaast 2004). Value networks are expanded
through VCoEs providing benefits to both individuals and the region as a whole.
Social Capital
The final factor relates to the region as a whole and to the qualities of the social environment.
Social capital is the value accessible from networks that are held together by a sense of
reciprocity based on goodwill, mutual support, common language, norms and trust (Huysman
and Wulf, 2004). It is the interaction between social capital and intellectual capital which
forms the foundation of competitive advantage in organisations and is central to
Mason, C., Castleman, T. and Parker, C.M. (2008) 'Communities of enterprise: developing regional SMEs in the
knowledge economy', Journal of Enterprise Information Management, vol. 21, no. 6. pp. 571-584.
Page 9
understanding the dynamics of organisations and their ability for innovation and value
creation (Von Mutius, 2005). Social capital is fundamental for regional development and for
regional initiatives involving VCoEs. Virtual communities have been identified as a means
of enhancing regional social capital with the added potential of facilitating the development
of learning regions (DCITA, 2005).
Access to the value inherent in social capital revolves around the network ties or strength of
links between actors in the network. Social capital is very significant in ICT regional
development initiatives involving CoEs. While ICT is not a panacea for regional solutions
and cannot be pushed if it is in direct conflict with the principles of social capital (Karlsson,
2005), VCoEs are potentially inclusive and can facilitate the development of social capital
through online interaction. We have illustrated that CoEs provide an appropriate means of
promoting the value creating potential inherent in regions. Virtual CoEs have the added
potential of enabling the region to take on innovativeness and become a learning region.
Summary and Conclusions
This paper has outlined the concept of (Virtual) Community of Enterprise as a refinement of
and extension to the well-known concept in the knowledge management field, (Virtual)
Community of Practice. It has highlighted the special nature of networks of SMEs in regional
areas which often do not have an industry focus, so their common interest is in strategic level
development.
CoEs harness intellectual capital which is essential for creating learning regions and ICT
investments facilitate VCoE formation to provide the necessary conditions for replicable
innovation. CoEs give their members access to best practice through networks. ICT extends
the network’s reach, thus changing relationships and expanding the benefits to both the
region and individuals. CoEs support the development of an innovative culture in regional
clusters, and VCoEs’ online interactions extend this innovative potential to include highly
valued sources of external knowledge. CoEs ability to develop social capital promotes the
value creating potential of regions. VCoEs add to that potential by facilitating the emergence
of a learning region thus expanding its learning potential and ability to stimulate innovation.
The CoE focus on collective learning and knowledge sharing will increasingly be supported
by ICT initiatives to form VCoEs, connecting regional enterprises more powerfully for the
collective generation of value. ICT enablement alone, however, cannot achieve these aims. It
must be aligned with the fundamental sources of value creation. ICT initiatives will help a
region succeed only if social development is considered. The implications of this conclusion
are that VCoEs, designed specifically to address the unique requirements of SMEs in regions,
have the potential to provide value for regions in a way that few ICT based regional
development initiatives have been able to achieve.
This paper’s contribution is conceptual. The utility and robustness of the VCoE concept will
only be demonstrated through subsequent research. It is possible that we have overestimated
SMEs’ focus on their enterprise as opposed to practice. We may also have overemphasised
the importance of social capital formation as opposed to intellectual capital generation. There
are a number of fruitful areas for such research which would clarify these issues and advance
the understanding of SMEs’ knowledge sharing in regional areas.
1. It is important to study the kinds of knowledge sharing that occurs in SME regional
business networks, both in regions where there is an industry focus and those where
the SMEs span a variety of industries. This would help to assess what kinds of
knowledge are shared and how much the focus is on specific intellectual capital and
Mason, C., Castleman, T. and Parker, C.M. (2008) 'Communities of enterprise: developing regional SMEs in the
knowledge economy', Journal of Enterprise Information Management, vol. 21, no. 6. pp. 571-584.
Page 10
how much is related to the development of social capital. We would hypothesise that
in regions with no industry focus, social capital development would be paramount.
2. Research into the kinds of value that SMEs seek to achieve from their knowledge
sharing in networks would help identify the areas in which local practitioners and
facilitators should develop VCoEs. Without a clear indication of what the end-users
want from these networks, business development initiatives will struggle to attract
local interest.
3. There are many avenues available for regional networking and knowledge sharing,
but there is a lack of data about choices of communication channels, both online and
traditional. An examination of participants’ preferences for channels of
communication and their patterns of use would be valuable, especially if this
investigation were to be conducted on a broad scale, allowing a large number of
factors and alternatives to be examined.
4. Action research whereby some of the insights from the VCoE concept could be
implemented would provide a powerful test of this concept. Although such research
would be, necessarily, limited in scope, it would give direct and useful feedback that
would help refine this concept.
Further research will test the viability of the VCoE concept and lead to its conceptual
refinement, identifying those contexts in which it is most appropriate and useful.
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Author Autobiographical Notes
Cecily Mason is a Lecturer at Deakin University and has recently submitted her Doctor of
Philosophy. Her research investigated the relationship between the socio-economic factors in regional
non-industry aligned SMEs and whether CoEs / VCoEs provide a lens into regional ICT initiatives to
facilitate value creation for SMEs and their regions. Cecily has published and presented her research
in national and international venues. An IT educator for many years Cecily is on industry panels
relating to IS and knowledge management.
Tanya Castleman holds a Chair in Information Systems at Deakin University where she is the Head
of the Deakin Business School. Her research interests include the social aspects of information and
communication technologies, particularly in relation to electronic business. Her research covers a
variety of areas including small business use of ICT, employee management in an eBusiness
environment and community development and sustainability. She is also interested in the government
and policy dimensions of eBusiness and theoretical paradigms for research in ICT.
Craig Parker is a Senior Lecturer in the School of Information Systems at Deakin University,
Australia. Dr Parker is co-editor of the Journal of Information Systems and Small Business and
associate editor for the Journal of Electronic Commerce in Organizations. He has spent over a decade
conducting research on interactive business simulation approaches to teaching eBusiness and on small
business use of eBusiness. He also conducts research and supervises student research projects in the
Mason, C., Castleman, T. and Parker, C.M. (2008) 'Communities of enterprise: developing regional SMEs in the
knowledge economy', Journal of Enterprise Information Management, vol. 21, no. 6. pp. 571-584.
Page 14
areas of eBusiness adoption by small firms. He has published and presented his research widely in
national and international venues. He is a member of editorial boards for several leading international
journals.
Corresponding author
Cecily Mason can be contacted at: Cecily.Mason@deakin.edu.au
