A Study of Rural Micro-enterprises; Increasing Understanding through a Dynamic Capability Lens

This research investigates rural micro-enterprises, analysing them through the lens of dynamic capability. Rural micro-enterprises are a vibrant, heterogeneous sector within the UK economy (Faherty & Stephens, 2016). Increasing understanding about how rural micro-enterprises develop dynamic capabilities and evolve could contribute towards improving the sustainability of rural communities, encouraging a diverse business base and ultimately helping rural communities survive (Paddock & Marsden, 2015). This research contends that a deeper understanding about how change is manifested within rural micro-enterprises and whether dynamic capabilities (Eisenhardt & Martin, 2000; Teece, 2007; Teece, Pisano & Shuen, 1997) are present within rural micro-enterprises is beneficial to increase understanding of how such business evolve (Kelliher & Reinl, 2009). Increasing such knowledge will help extend develop dynamic capability theory into the rural micro-enterprise domain.

A review of extant literature highlights a knowledge gap concerning dynamic capabilities, rural enterprise and micro-enterprise, with dynamic capability research rarely venturing into the realm of micro-enterprises (Kevill, Trehan, Easterby-Smith, & Higgins, 2015) and seldom into the rural micro-enterprise arena. Context is an important consideration for this research because the majority of dynamic capability research has been conducted within large organisations (Adner & Helfat, 2003), such organisations being intrinsically different from micro-enterprises in their operations. It is anticipated that this empirical research’s findings will contribute to the development of a framework to understand how rural micro-enterprises develop dynamic capabilities and which micro-foundations underpin the identified dynamic capabilities.

This research adopts a qualitative approach. Nineteen narrative interviews were conducted with rural micro-enterprise owner-managers during 2018 across three geographies. This data was supplemented by photographs and an interview with a council policy maker responsible for rural development.

The findings of this research indeed suggest that dynamic capability theory exhibits different attributes in rural micro-enterprises, with a blurring of the lines demarcating individual-level and organisational-level dynamic capabilities. In addition, due to the influence of the owner-manager, the construct ‘owner-manager faculty’ plays an important role as a micro-foundation of dynamic managerial capability. In some rural micro-enterprises these dynamic managerial capabilities directly influence the business to achieve performance advantage rather than solely acting as a micro-foundation of organisational-level dynamic capabilities. From a rural perspective the findings of this research question extant literature pertaining to rural space/place and the notion that rural micro-enterprises add value to the rural economy. This research finds in some cases rural micro-enterprises may be negative contributors to rural economic sustainability due to the actions and choices made by the owner-managers. Such owner-managers are classified a ‘parasitical’ in a fresh taxonomy framed by their dynamic capability orientation and rural embeddedness.

It is anticipated that this increased understanding about dynamic capabilities within rural micro-enterprises will help inform policy makers what specific support is needed to enable rural micro-enterprises to establish themselves, grow and thrive within the rural economy to the benefit of rural communities. From a practice perspective, by starting to explore the gap in understanding about dynamic capabilities within rural micro-enterprises insight has been generated which can help rural micro-enterprise owner-managers to better understand how to manage change within their business and compete more effectively within the UK and global marketplace.